Haj-Umrah services by private tour operators not exempt from GST, service tax: SC

Haj and Umrah services by private tour operators will not be exempted from the Goods & Services Tax (GST) and service tax, the Supreme Court said on Tuesday and dismissed a bunch of 17 pleas. However, services provided by the Haj Committee will continue to get exemption.

The matter was placed before GST Council in 2018, but was rejected there too.

“We are of the considered view that the arguments based on discrimination have no substance at all, as HGOs (Haj Group Organisers) and the Haj Committees do not stand on par and in fact, the Haj Committees constitute a separate class by themselves, which is based on a rational classification which has a nexus with the object sought to be achieved,” a Division Bench of Justices AM Khanwilkalr, Abhay S Oka and CT Ravikumar said while dismissing the bunch of petitions.

It also said there is a rational basis for classifying specified organisations as a class and keeping out private tour operators from the exemption.

Commenting on the ruling, Sandeep Sehgal, Partner-Tax, AKM Global, said the Supreme Court rejected the ground of discrimination as the exemption is already available for tours for Haj Pilgrimage, if conducted through approved channels. Hence, “other private operators operating such tours shall be required to charge GST on their services,” he said.

Petitions challenged the levy of GST on Hajis who avail themselves of services offered by registered private tour operators on the grounds that no tax law can be applicable on extra territorial activities per Article 245 of the Constitution. They also argued that the levy is discriminatory as it exempts certain Hajis who undertake the pilgrimage through the Haj Committee of India.

A GST levy of 5 per cent (with input tax credit) is applicable on air travel by pilgrims who utilise the services of non-scheduled/charter operations for religious pilgrimage facilitated by the Centre under bilateral arrangements. However, if the service of a specified organisation in respect of a religious pilgrimage is facilitated by the External Affairs Ministry under bilateral arrangement, the rate would be NIL. Since, private operators are not covered under the definition of specified organisation as defined in the exemption notification, so services provided by them are not exempted.

A proposal was placed before the GST Council in 2018, when the Andhra Pradesh Government requested “Exemption from GST on the services provided by the private tour operators to religious pilgrimages.” However, the Fitment Committee said it was taxable under service tax also. “Request is for a new exemption, may not be accepted. No exemption on such grounds would be desirable as many such request may come in future,” it said. Accordingly, the proposal was rejected.

However, in the same meeting, the Council did agree to a proposal to lower the rate to 5 per cent from 18 per cent on transport of passengers travelling by air in chartered flight in respect of religious pilgrimage facilitated by government under bilateral agreements. The Council agreed to reduce the rate of tax on air transport of passengers in chartered flights on such pilgrimages to 5 per cent from 18 per cent.

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